Correlation Between European Metals and Amaroq Minerals

Can any of the company-specific risk be diversified away by investing in both European Metals and Amaroq Minerals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining European Metals and Amaroq Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between European Metals Holdings and Amaroq Minerals, you can compare the effects of market volatilities on European Metals and Amaroq Minerals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in European Metals with a short position of Amaroq Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Amaroq Minerals.

Diversification Opportunities for European Metals and Amaroq Minerals

-0.36

Correlation Coefficient

European Metals  Amaroq Minerals

Very good diversification

The 3 months correlation between European and Amaroq is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Amaroq Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amaroq Minerals and European Metals is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on European Metals Holdings are associated (or correlated) with Amaroq Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amaroq Minerals has no effect on the direction of European Metals i.e., European Metals and Amaroq Minerals go up and down completely randomly.

Pair Corralation between European Metals and Amaroq Minerals

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Amaroq Minerals. In addition to that, European Metals is 1.55 times more volatile than Amaroq Minerals. It trades about -0.12 of its total potential returns per unit of risk. Amaroq Minerals is currently generating about 0.38 per unit of volatility. If you would invest  5,780  in Amaroq Minerals on September 15, 2024 and sell it today you would earn a total of  4,435  from holding Amaroq Minerals or generate 76.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

European Metals Holdings  vs.  Amaroq Minerals

European Metals Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Amaroq Minerals

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Amaroq Minerals are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Amaroq Minerals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Metals and Amaroq Minerals

The main advantage of trading using opposite European Metals and Amaroq Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, Amaroq Minerals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Amaroq Minerals will offset losses from the drop in Amaroq Minerals' long position.

The idea behind European Metals Holdings and Amaroq Minerals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.